Europe has gotten a bit of a reprieve today with Dutch TTF gas prices down 20% to $138.
A look at the chart shows that even a 20% is only a dent.
Gas is selling for $3.71 in this US. This is roughly equivalent to $46.
Power prices have also come back from the extremes but that likely reflects holiday shutdowns of industry. They’re down around 35% for tomorrow in most of Europe.
However given the cold in Russia and tight supplies everywhere, there could be plenty of more pain to come.
A collection of organizations representing energy-intensive European industry released a statement yesterday noting that energy prices have increased 4-5x and noted that it has ‘severely impacted’ the competitiveness of the sector, which includes steel, cement, glass and metals processing.
They called for ‘swift action’ but it’s abundantly clear that Europe has no ideas, beyond more subsidies. Eventually that money will run out and factories will have to close. It certainly doesn’t bode well for long term investment.
The space I’m most worried about is fertilizer. For instance, the Netherlands has 25,000 acres of greenhouses. Before this energy crisis, natural gas related products were 30% of costs. Fertilizer is also a big cost for all outdoor farming. At some point (if not already), they simply shut down.
What happens to food prices then?